Economic growth in sub-Saharan Africa is forecast to pick up to 4.2% this year, as commodity prices stabilise and electrical power supply improves in many countries, the World Bank’s latest Global Economic Prospects report states.
Activity would vary across the region, with consumption growth remaining weak in oil exporting countries as fuel costs rise with the removal of subsidies and as currency depreciations erode consumer spending. In contrast, lower inflation in oil importing countries would help boost consumer spending.
Growth was expected to pick up moderately in the region’s three largest economies. Nigeria’s economy was forecast to expand by 4.6%, as efforts to rationalise the management and operation of the Nigeria National Petroleum Corporation could enhance revenues.
South Africa’s economy was expected to grow only modestly by 1.4%, compared with growth of 1.3% in 2015, as power supply and labour problems, subdued employment growth and higher interest rates crimp growth, while growth in Angola was forecast to edge up to 3.3% this year from 3% in 2015 as the economy rebounds gradually from constrained government spending and elevated inflation.
With oil prices expected to remain low, fiscal revenues were also likely to decline in Angola and Nigeria, leading to deficits. Budget gaps were also anticipated to remain high in oil importing countries as government spending continued to grow.
Foreign investment into commodity exporters was also likely to slow as a result of the fall in commodity prices. However, in some low-income commodity exporters, governments are expected to invest heavily in energy and transport infrastructure, drawing on bond issuances, as in the case of Ethiopia; public-private partnerships, as in Mozambique, Rwanda and Tanzania; and financing from China.
Meanwhile, the report found that activity in some frontier markets was set to accelerate, with growth in Ghana forecast to recover to 5.9% from 3.4% in 2015 owing to rising oil production and shrinking budget and trade gaps.
Kenya’s growth was also projected to pick up to 5.7% this year from 5.4% in 2015 as a result of large-scale infrastructure projects, which included a new port and expansion of the railway system that should help support trade.
Further, low-income countries were on track to grow rapidly as a result of limited exposure to commodities that have seen the sharpest price drops, and as large-scale infrastructure projects unfold.
Public investment, consumer spending and mining production were projected to support high 2016 rates of growth in Côte d’Ivoire, Ethiopia, Mozambique, Rwanda and Tanzania.
However, the report warned that the global economic environment was likely to be less conducive to growth in sub-Saharan Africa in coming years as lower commodity prices and tighter financial conditions held activity back.
Many countries had sizeable fiscal and current account deficits and rising debt levels, rendering them vulnerable to currency pressures, inflation and diminished business confidence if these conditions were to deteriorate.
World Bank Group development prospects director Ayhan Kose highlighted that, through the implementation of credible macroeconomic and financial sector policies, emerging markets could further build resilience to the global downturn.
“Emerging and developing economies could stimulate growth through fiscal and monetary policy measures, provided that they have sufficient room in their budgets and central bank policies to undertake such steps,” he said.